Economy: Reacting to economic challenges

Question 1

What was Germany’s national debt in 1918? - W

Answer 1

150 billion marks

Question 2

How did Germany fund the war effort in WW1? - W

Answer 2

War bonds- they relied on their own citizens to lend money as they didn’t have rich allies, unlike the Entente Powers.

Question 3

How did the government convince 10 million German citizens to purchase a total of 98 billion marks in war bonds?

Answer 3

The government paid bondholders annual interest and promised to return the lump sum (their savings) after the war.

Citizens were encouraged to buy war bonds through propaganda campaigns that assured then that they would be hastening an inevitable German victory.

Question 4

How did the government plan on paying back the bondholders? - W

Answer 4

Via heavy reparations from the defeated Entente Powers.

Question 5

How much in reparations did Germany have to pay as a result of the Treaty of Versailles (1919)?

Answer 5

£6.6 billion

Question 6

What was the problem with the reparations payment? - W

Answer 6

It needed to be paid in gold which was difficult for Germany as they had spent much of its gold during the war and now needed to buy it on the international market.

Additionally, the Weimar Republic’s newly founded constitution was very generous in welfare and social spending and felt unable to reduce this to free up resources to pay reparations.

Question 7

How was the Reichsbank’s role changed during WW1? - W

Answer 7

They had initially been responsible for maintaining the health of German currency by preventing excessive inflation. They did this by ensuring that the number of bank notes circulating the German economy was linked to the amount of gold in Reichsbank vaults.

This was eased in 1914 as part of Germany’s financial mobilisation for the war. They were permitted to print money not covered by the stock of gold in its vaults.
- Meant that by 1918, the total volume of marks in circulation had increased by x9.

Question 8

By what percentage did prices rise after WW1? - W

Answer 8

200%

Question 9

How did Germany’s loss of territory, as a result of the Treaty of Versailles, impact their economy? - W

Answer 9

Loss of land, e.g Alsace-Lorraine and the Saar meant that production of coal fell by 15% and Germany loss 1/2 of its deposits of iron-ore.

Question 10

How did the devastation of war across the world impact Germany’s economy? - W

Answer 10

It resulted in a loss of income through international trade.

The global economic slump following WW1 meant that Germany could no longer rely on international trade and was unable to return to pre-war levels of trade internationally.

Question 11

What was the impact of returning soldiers? - W

Answer 11

The women that had taken their jobs were sacked which contributed to how in February 1919, 1.1 million people were unemployed.

Question 12

How much did unemployment fall between the 1919 and 1922? - W

Answer 12

It dropped by 50% in the second half of 1919 and was a mere 12,000 in 1922.

Question 13

Why did unemployment fall between 1919 and 1922? - W

Answer 13

Wages were very low.

By 1919, the value of wages was less than 1/2 of what it had been in 1913. This meant that employers could take on a lot of workers to keep up with the transition from war production to consumer production.

Question 14

What caused inflation? - W

Answer 14

Reparation payments.
- This was a serious problem as the economy was already dealing with a decline in value of the mark and 150 billion marks in war debt.

Question 15

How did the Weimar government fund reparation payments in 1921? - W

Answer 15

By printing money in order to buy foreign currency which would be used to buy the gold to pay for the reparations.

Question 16

What impact did printing money have on the German economy? - W

Answer 16

It flooded the economy without a concurrent rise in goods.
- This was caused by huge rise in prices as a result of inflation.

Question 17

When a runaway inflation destabilised the Germany economy, how did the Weimar government respond in 1922? - W

Answer 17

They renegotiated with the Allies to try to reduce/delay the reparations payments.

Question 18

What did the Allies agree to in the renegotiation in 1922? - W

Answer 18

• 720 million gold marks (set in gold marks as they would retain their values)
• 1,450 million gold marks worth of materials

Question 19

How did the Weimar governments’ reluctance to raise taxes lead to their inflation being pushed up further? - W

Answer 19

It led to them trying to renegotiate again which resulted in international investors and major banks losing faith in the German economy, causing the mark to fall in value.

This made foreign goods more expensive, which increased inflation.

Question 20

Why did Germany fail to pay reparations in December 1922? - W

Answer 20

They were in the middle of an inflation crisis and therefore failed to pay.

Question 21

What happened as a result of Germany’s failure to pay reparations in December 1922? - W

Answer 21

The Reparations Commission declared that Germany was in default, which lowered confidence in the economy further and increased inflation.

France and Belgium responded by having 60,000 occupy the Ruhr with a goal of seizing control of the coal produced as their payment.

Question 22

How did Germany respond to the occupation of the Ruhr? - W

Answer 22

The government couldn’t force them out through military as the Treaty of Versailles meant their army was significantly outnumbered.

They announced it would suspend all future reparation payments until the troops withdrew and initiated passive resistance in the Ruhr (the workers went on strike, refusing to produce coal).

Question 23

The government used ____ paper mills and around ____ print firms to produce more bank notes of higher denominations. - W

Answer 23

30, 130

Question 24

By November 1923, how many bank notes had the government issued? - W

Answer 24

1 trillion mark notes

Question 25

What was the consequence of hyperinflation (1923)? - W

Answer 25

• Money became worthless
• Workers became difficult to pay - the value of money fell so rapidly that paying people monthly or even weekly made little sense.
• By late 1923, prices were changing hourly.
• Farmers began refusing to sell products - huge stocks of milk and meat built up whilst people in cities were hungry.

Question 26

What was Notgeld and why did the Weimar government issue it? - W

Answer 26

Notgeld was an emergency currency independent of the Reichsmark. It was implemented in order to keep the economy going.

They hired Bauhaus graphic designers to design it but they were printed in large quantities and began losing value.

Question 27

How much did the price of rye bread increase from January 1923 to November 1923? - W

Answer 27

Jan 1923: 163 marks
Nov 1923: 233 billion marks

Question 28

How were savings and debts impacted by hyperinflation? - W

Answer 28

They became worthless.

• The class gap between the middle class and the working class disappeared as a result of this.
• Many middle class families had to sell or barter their possessions to survive and take on a manual job in return for food.
• Many middle class Germans blamed democracy on their poverty.

Question 29

Who recognised that passive resistance had failed to end the occupation of the Ruhr? - W

Answer 29

Gustav Stresemann

Question 30

What was Stresemann’s policy of fulfillment? - W

Answer 30

It planned to end the occupation by meeting the Allies’ terms.

Miners would return to work and provide coal for the French in the short term.

In the long term, Germany would make the payments required.

Question 31

What did Stresemann’s policy of fulfilment plan in regards of reparation renegotiations? - W

Answer 31

It planned for using international sympathy to negotiate a better deal.

• The USA had considerable sympathy for Germany following the French occupation of the Ruhr and Stresemann’s policy of fulfilment. Following the stabilisation of the German economy, the Dawes Committee was set up in April 1924 to find a workable way for Germany to repay its loans and reparations. The result was the Dawes Plan.

Question 32

When did Stresemann achieve a renegotiation of the reparations sum? Why was this significant? - W

Answer 32

1924
It was significant because it also ended the occupation of the Ruhr for 1925.

Question 33

How did Stresemann reduce inflation? - W

Answer 33

• Implementing deep spending cuts which meant reducing the pay of civil servants, in some cases by more than 50%.
• Slashing benefits.
• Replacing the old mark with the Rentenmark in 1923 which meant regular forms of trading and reparation payments could restart.
• This was then improved further when he replaced this with the Reichsmark in 1924 which was pegged to the value of gold.

Question 34

What did Stresemann prioritise over the payment of reparations? - W

Answer 34

German economic stability.

Question 35

How did Stresemann demonstrate his prioritisation of economic stability over the payment of reparations? - W

Answer 35

Through the signing of the Dawes Plan in 1924 which helped build Germany a formal economic alliance with the USA.

Question 36

Why did Stresemann want the USA to invest in the Germany economy? - W

Answer 36

The larger the stake the US had in it, the higher the chance the US might stand in the way of French demands for high reparations payments.

Question 37

What was the Dawes Plan (1924)? - W

Answer 37

USA loaned Germany a total of 800 million gold marks to help it recovery its economy.

Question 38

How did the Dawes Plan (1924) resolve the problem of paying reparations? - W

Answer 38

They were able to use US loans to pay their reparations.

Question 39

How did the Dawes Plan (1924) help Germany economically recover from WW1? - W

Answer 39

The Weimar government was able to use part of the money not used to pay reparations to invest in industrial development.

Consequently, German industry was modernised and industrial output doubled between 1923 and 1928. Wages also rose every year during this period.

Question 40

By what year had Germany’s GDP (Gross Domestic Product) returned to its 1913 level? - W

Answer 40

1928

Question 41

What was increased government revenue spent on? - W

Answer 41

It was spent on public works schemes such as urban housing, sports facilities and opera houses.

Question 42

What was the Young Plan (1929)? - W

Answer 42

Agreed to extend the period of reparations to 1988 in order to make Germany’s payments more manageable.

Reduced the total amount of reparations by 20%.
- Germany was to pay 2 billion pounds per year, two thirds of which could be postponed each year if necessary.

Question 43

What did extreme Nationalists, like the Nazis, find problematic about the Young Plan (1929)? - W

Answer 43

Extreme nationalists like the Nazis saw it as a treacherous betrayal of the Fatherland as it inadvertently accepted Germany’s war guilt from the Treaty of Versailles.

Question 44

What was the problem about the rise in wages following the Dawes Plan (1924)? - W

Answer 44

It meant that labour relations were becoming increasingly strained due to workers demanding pay rises in order to keep up with the consequential rise in cost of living.

Question 45

How did the government try to avoid workers strikes in the 1920s? - W

Answer 45

The government passed a law imposing compulsory arbitration (forced
meetings) on industrial disputes to avoid strikes because this would not be in the public’s interest.
- Despite this, many firms were resisting this government intervention by 1928.

Question 46

What issues was Germany having with its trade in the 1920s? - W

Answer 46

Germany had trouble exporting goods to
Britain and the USA.

• The USA had increased tariffs on imports, and Britain primarily traded with its Empire.
• Primarily due to reparations and debt repayments, the German balance of trade was negative every year between 1924 and 1929, except for 1926.
• This meant that despite industrial growth, Germany was importing more than it was exporting, which is not good for an economy.

Question 47

Why were US loans problematic? - W

Answer 47

It meant that German economic recovery was never entirely secure because it was not self-sustaining.
- If US money was withdrawn, the German economy would collapse, as it did in late 1929. Stresemann succinctly summed up the situation - economically, Germany was “dancing on the edge of a volcano”.

Question 48

How was the German farming industry falling behind? - W

Answer 48

German farming had failed to modernise earlier in the century.

This meant American and British farms were able to produce grain and meat more cheaply, In comparison, the German farming industry stagnated.

Additionally, following the loss of a lot of farming land under the Treaty of Versailles in 1919, farm production dropped significantly.
- With the exception of 1928, cereal production was below 20 million tonnes, compared to 30 million tonnes in 1913.

Question 49

How was the timing of Stresemann’s death unfortunate? - W

Answer 49

It was situated less than a month before the Wall Street Crash (1929) which would cause the demise of the USA loans to Germany.

Question 50

As a result of the Great Depression (1929-32), how many Germans were unemployed by 1932? - W

Answer 50

6.1 million

Question 51

How did many German families cope with the Great Depression? - W

Answer 51

They had to make do in any way that they could - many sold their possessions, some found charity from their churches.

Question 52

What happened to the homeless during the Great Depression? - W

Answer 52

Homeless were made to squat in disused office buildings, children scavenged for food or joined gangs in order to commit acts of petty crime and there was a rise in male and female prostitution and others begged or busked.

Question 53

By what percentage did industrial production drop as a result of the Great Depression? - W

Answer 53

40%

Question 54

By what percentage did trade drop as a result of the Great Depression? How did this impact German businesses? - W

Answer 54

55%
- German businesses could find no foreign market for their goods.

Question 55

How many German firms closed as a result of the Great Depression? - W

Answer 55

50,000

Question 56

How were German farms hit by the Great Depression? - W

Answer 56

German agriculture couldn’t compete with much more efficient farms, especially in the USA - this meant it was harder to export German food.

The decline in domestic demand for food, with poor food exports, meant the price of food decreased by 45% between 1929-32.

Farms were therefore hit hard by the Depression as they were not earning much back from their products.

Question 57

Why was the Weimar government’s commitment to providing welfare hard to uphold? - W

Answer 57

Their welfare system had been made during the ‘Golden Years’ of the 1920s, which assumed economic growth.

This meant the budget only covered around 80,000 unemployed workers and only for a few months which left millions of unemployed people unsupported by the government, many of whom were unemployed for 2 or 3 years.

Business profits and average earnings fell which meant the government had less money to pay welfare bills.

Question 58

How did the Great Depression motivate people to turn to extremist parties? - W

Answer 58

Hitler claimed the only way out of economic crisis was to rearm and take land in the east by force.
- This would gain more raw materials and more land to farm.
- Military strength was something Hitler felt was essential to prosperity as strong countries could economically dominate weaker nations.
- These arguments appealed to traditional prejudices and became more attractive as the Depression went on and democracy still failed to have answers to restore prosperity.

Question 59

How did the increase in Communist activity as a result of the Great Depression further benefit extremist parties? - W

Answer 59

The Communist Party advocated that economy focused on the needs of the workers rather than the profits of big businesses.
- They organised rent strikes in poor areas where workers couldn’t afford to pay their landlords.
- They also organised the Red Front which defended whole sections of cities from police and bailiffs who wanted to evict workers or seize their property in lieu of rent.
- This growing strength of communism threatened a revolution which middle class would be stripped of their property and wealth - the Nazi SA stood up to the Red Front, encouraging more support for the Nazis.

Question 60

How did the Weimar government implement spending cuts to stabilise the economy during the Great Depression? - W

Answer 60

Cut civil servants’ and government employees’ wages by 20% between the beginning of 1930 and the end of 1922.
- This was controversial as Hermann Muller, German chancellor and SPD leader at the start of the Depression, refused to sanction welfare cuts in spite of the rising cost of unemployment benefits.
- This refusal led to the collapse of the Grand Coalition which had ruled since 1928.

Cut welfare payments: Bruning used Article 48 to push through unemployment benefit cuts.
- This led to a huge increase in poverty for the 4 million dependent on benefits in this period.
- Bruning’s policies protected the economy from renewed inflation but the worsening of the economic situation was part of Bruning’s long-term economic aim of cancelling reparations.

Question 61

What was Chancellor Bruning’s priorities during the Great Depression? - W

Answer 61

Bruning’s priority was to end reparation payments, his strategy was to use economic crisis to prove that the country couldn’t pay - persuading Britain and France to drop their reparation demands.

Question 62

When and where were reparation payments suspended as a result of Germany’s inability to pay? - W

Answer 62

Hoover Moratorium of June 1931.

Question 63

Why did Chancellor Bruning refuse to increase government spending despite having more money now that reparations were suspended? - W

Answer 63

His short-term plan was to allow the crisis to deepen so that he could ensure not just the suspension but the cancellation of reparations.

He also wanted to use the economic crisis as a pretext for abolishing the welfare state and destroying Germany’s trade unions.

Question 64

What conference was held in 1932 that liquidated the reparation payments completely? - W

Answer 64

The Lausanne Conference

Question 65

What public work schemes helped improve rates of unemployment? - W

Answer 65

• Bruning initiated a small public works scheme in 1931 focusing on road and canal construction. He expanded the programme towards the end of his time as chancellor in 1932.
• Von Papen expanded this further increasing the budget from RM167 million to RM302 million in September 1932. This programme emphasised indirect measures, such as giving tax cuts to firms that employed new staff.
• Schleicher continued the existing initiatives but believed that direct intervention was needed. He established a RM500 million emergency fund to employ people to carry out repair work, road and canal maintenance and land improvement schemes.

Question 66

How were public work schemes not fully effective in improving the rates of unemployment? - W

Answer 66

The drop in unemployment was too little to restore faith in the system and the Nazis would later expand these programmes further and claim credit for their success in the first years of their government.

Question 67

What were the living standards of the working class during the Weimar period? - W

Answer 67

• The standard of living of working class Germans rose between 1918 and 1932, although mass unemployment between 1930 and 1932 hit them hard.
• Earnings increased significantly (after 2 years of Depression, weekly wages for those in work were 30% higher than they had been in 1924).
• 8 hour working days - more time for leisure.
• Government spending on housing and welfare increased.
• Welfare 60% higher and housing x20 higher than what it had been in 1913.
• The workers were generally better off under the WR than the Kaiser as they received a greater share of the national income.

-The workers position improved largely due to the increased power of their unions and the influence of the SPD in the Reichstag - both being committed to advancing rights and welfare of working people.

• Unemployment threatened the position of the working class because it was accompanied by welfare cuts and an erosion of union power.

Question 68

What were the living standards of the middle class during the Weimar period? - W

Answer 68

• The established middle class measured their standard of living through their savings and leisure time.
• Hyperinflation wiped out their savings, and meant they had a fixed income. This meant they were forced to sell or barter their property.
• Americanisation of Weimar culture affected how they spent their leisure time (dance halls, jazz clubs, cinemas emerging in the 1920s)
• The established middle class faced a 60% drop in income since the 1913 value whilst the emerging middle class only faced a 25% drop.
• The emerging middle class faced a better standard of living: they were able to pay off their debts during hyperinflation and were willing to accept Americanisation. They measured wellbeing in terms of consumer goods.

The middle class were impacted by the Depression as they faced pay decline, loss in jobs and savings and also loss in status.

Many felt threatened and insecure by the working classes as a result of the Depression as they were protected by powerful unions and a large, organised SPD.

Question 69

What were the living standards of farmers during the Weimar period? - W

Answer 69

• German agriculture did not prosper during the 1920s because of the Naval Blockade, food shortages, loss of farming land due to the Treaty of Versailles (which caused tight regulations of farmers, capping prices they could charge resulting in a loss of profits).
• Hyperinflation meant that farmers could pay off their debts and food became more valuable meaning business tended to do well from 1922-24.
• Farmers were hit by cheap imports of food → decreased the value of their produce.
• Agricultural prices decreased further with mass unemployment - rising numbers of Germans cut back on food purchases.
• Working classes were doing well whilst farmers suffered leading to a widening gap between the two. Many moved to the right, having lost faith in democracy.